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💡 Tip Income Exclusion Explained (2025 Tax Update)
A major new tax provision could mean big savings for workers who earn tips. Starting this year, employees can exclude up to $25,000 of tip income annually from their federal taxable income—if those tips are properly reported to their employer and shown on a W-2.
Here’s what you need to know:
✅ Exclusion amount: Up to $25,000 in tip income
✅ Applies to tips reported to employers (W-2)
⚠️ Phase-out begins at: • $150,000 for single filers • $300,000 for married couples filing jointly
⚠️ Tip income is still subject to Social Security & Medicare taxes
⚠️ May still be taxable at the state level This new provision could have a major impact on workers in the service industry—bartenders, servers, hairstylists, and more. Watch now to understand how it works and whether you qualify.
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